What Is a Hard Lender?
Hard lenders are financial institutions that offer hard money loans for specific types of investments. You won't find hard money loans at your local bank. They are alternative, quick-cash solutions for investors who work in very competitive areas. Hard money loans are secured, short-term loans that use the purchased property as collateral. They are ideal for investors who have bad or mediocre credit scores and are open to collateralizing the property. Small business owners who don't qualify for traditional financing, rental property investors, and small investors are some of the most typical clients.
Hard money loans with no credit check have numerous advantages, but they come with risks. Let's take a closer look:
Pros Of Hard Money Loans:
- Fast closing and quick approvals – hard lenders have far fewer requirements for getting approved when compared to conventional banks; you can get the cash you need in as little as 24 to 48 hours (banks will need a minimum of 30 days for structuring your loan and payment plan); if you already work with a hard lender, approval times can be even shorter;
- Low credit scores accepted – conventional banks will deny your application if your credit score is poor, but hard lenders will not; they base their decision on the property's profitability, not on your personal credit score; almost every client with a credit score of 620 and above will be approved by a hard lender;
- No prepayment penalties – hard lenders will most likely not penalize you if you pay back the loan earlier than the loan term, so if you complete the project earlier, you will have a huge financial advantage;
- They can be good partners – this is a major advantage of hard lenders – they are a great resource for advice, contacts, and guidance on deals; this is because most work with other real estate investors and have the experience to help you; a good hard lender is not just a source of quick cash, they can offer professional advice too;
Cons Of Hard Money Loans:
- Medium and high-interest rates – hard money loans for bad credit tend to be more expensive than conventional loans; the interest rates usually start from 7 percent and may go up to 12 percent; your deal will be approved, but the lender is taking more risk, so the interest rate goes up;
- Down payment is required – investors are required to bring at least 20 percent of the purchase price at closing; this can be a con for novice investors, particularly in high-cost real estate markets.
If you want to build a hotel, a Commercial Real Estate Funding, or if you want to buy an apartment building, going to a traditional lender may not cut it.
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